Insurance Premium Tax set to rise on 1st October 2016

The rate change will be effective from 1st October 2016 and there will be a transitional period (which may vary from insurer to insurer) which will end on 31st January 2017.  What this means in practice is that all policies with a start/renewal date on or after 1st October 2016 will be liable to 10% Insurance Premium Tax (IPT).

• All policies with a start/renewal date before 1st October 2016 will be liable to 9.5% Insurance Premium Tax provided the premium is paid within normal business guidelines i.e. usually within 30/60 days of inception/renewal;
• All premiums for new or renewal policies that incept on or after 1 October 2016 will be liable to 10% Insurance Premium Tax;
• Additional premiums or Mid-term adjustments in respect of an existing policy that incepts before 1 October 2016 will attract tax at 9.5% provided the premium is paid within 30/60 days (depending on insurers);
• All other additional premiums or MTAs with an effective date on or after 1st October 2016 will be liable to 10% Insurance Premium Tax; and
• Any premium refunds will attract IPT credit according to the rate of tax appropriate to the initial or additional premiums.

The transitional period is a concession granted by HM Revenue & Customs to accommodate arrangements where premiums with tax at 9.5% are submitted to insurers in the months following the rate increase.  However, this concession ends on 31 January 2017.